Martin Lewis was asked about the tax issue on his BBC podcast
Nationwide Building Society members may need to look over their tax obligations and get in touch with HMRC. Martin Lewis highlighted the matter and offered his perspective on his BBC podcast.
This issue is to do with a £100 payment that millions of Nationwide customers have recently received, in the latest Fairer Share scheme. This initiative sees Nationwide distributing its profits amongst loyal members, with an £100 payment issued to millions of account holders each time.
There have now been four rounds of the payment, with the current instalment arriving in customer accounts between 10 and 30 June. To be eligible this time round, you needed a combination of a Nationwide current account alongside either a savings account or a mortgage with them, plus specific account activity in recent months.
Nationwide has previously stated that most of the payments have now been distributed. While free money in your bank account is always appreciated, you may unfortunately need to return some of it to HMRC.
Martin Lewis was questioned on his BBC podcast about the potential tax implications of the £100 payment. The question came in from someone who holds a joint account with his wife, as he had received the £100 payment.
‘It does count’
He wanted to understand how the payment would be handled for tax purposes, whose allowances it would utilise and whether it would be reported to HMRC. Mr Lewis responded: “The Nationwide Fairer Share payment is an £100 payment this year and in previous years.
“Effectively, it’s a loyalty bonus for existing Nationwide customers who fulfil certain criteria. What is interesting about this particular payment is it does count as interest.
“If you get a bank switching bonus, that is seen as an incentive as opposed to a reward for an existing customer, so that is not taxable, the same as cashback on credit cards is not taxable. But because this is effectively a benefit of a mutual organisation and is a membership payout, that is taxable, and it’s taxable as interest.”
£50 each
He continued by clarifying who would be liable to pay tax on the payment. Mr Lewis said: “So for those people who earn above their personal savings allowance, of £1,000 a year as a basic rate taxpayer or £500 a year as a higher rate taxpayer, you would have to pay tax on the £100.
“If you earn less, you won’t have to pay tax on the £100 or if you’re a non taxpayer, you won’t have to pay tax on the £100. Like if you have joint savings, the interest payment is demarked 50/50, the Nationwide Fairer Share in a joint bank account is demarked 50/50.
“I haven’t asked Nationwide if that is what they report to HMRC but that is exactly what the situation is. I can’t see any reason why that isn’t what they would report to HMRC. So yes, you should consider this to be £50 each. Simple as that.”
‘You may need to contact HMRC’
Nationwide was asked to explain what occurs in such cases where a couple with a joint account receive a £100 payment. The building society stated: “The £100 payment belongs to the eligible member, however, in the case of a joint account where only one of the parties was eligible, HMRC may assume the interest is split between parties.
“The customer may need to contact HMRC for this to be changed if it impacts their tax position.” Regarding the tax you might be liable for, you are taxed on any taxable interest income according to your marginal income tax rate.
Therefore, if you were required to pay tax on all of your £50 portion of the payment, as a basic rate taxpayer you would owe £10 to HMRC. Higher rate taxpayers would face a £20 charge, while those on the additional rate would need to pay £22.50 to the tax authority.
